The question of what constitutes security under US securities laws remains a highly volatile topic in today’s crypto ecosystem.
When the FTX Derivatives Exchange imploded by filing for bankruptcy last year, Gary Gensler, chairman of the US Securities and Exchange Commission (SEC), was the regulator most blamed by the public. The blame lies with the fact that there were red flags displayed by the trading platform, which were not discovered due to the closeness between Sam Bankman-Fried and the regulators.
speaking in a exclusive chat with Intelligencer journalist Ankush Khardori, the connection between Gensler and Bankman-Fried was highlighted, as the two met only about twice since he took office. One such meeting was in March of last year when a team of executives from FTX and the IEX stock exchange met with the SEC to make the case for a federally approved trading platform.
According to Gensler, this proposal was considered dead on arrival as FTX had a significant conflict of interest in requesting such a trade.
“I indicated to them that they could lower their slide deck on the second slide,” Gensler said in the extensive conversation, “and that I didn’t think they should, with all due respect, that it wasn’t a valuable use. of his time.”
The only other meeting between Bankman-Fried and Gensler had occurred in 2021, and it served as the basis for claims that the embattled 30-year-old executive had the regulator in his pocket. The allegations against Gensler’s impartiality are even growing, particularly with the recent crackdown on the Kraken Exchange.
The SEC fined the trading platform the sum of $30 million earlier this month for offering Stake as a Service to US clients. According to Kraken CEO Jesse Powell, the SEC is simply scapegoating the good guys while letting the bad guys go free.
Gary Gensler on the stock offering
The question of what constitutes security under US securities laws remains a highly volatile topic in today’s crypto ecosystem. While the commission has been embroiled in a legal battle with Ripple Labs Inc since late 2020, it could also become embroiled with Paxos Trust over the issuance of the Binance USD stablecoin as an unregistered security.
As contradictory as this position may seem, Gensler believes the reason is clear.
“Anything that’s not bitcoin,” Gensler said, “you can find a website, you can find a group of entrepreneurs, they can set up their legal entities in an offshore tax haven, they can have a foundation, they can legalize it to try to arbitrate and hinder jurisdictionally, etc.”
According to him, this group of entrepreneurs often finds a way to market their tokens to the public who, in turn, expect some returns on their investment in the long run.
However. the commission wants to change its position, the outcome of its case with Ripple will certainly set an important precedent for the broader ecosystem going forward.
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Benjamin Godfrey is a blockchain enthusiast and journalist who enjoys writing about the real-life applications of blockchain technology and innovations to drive mainstream acceptance and global integration of emerging technology. His desire to educate people about cryptocurrencies inspires his contributions to renowned blockchain-based sites and media. Benjamin Godfrey is a lover of sports and agriculture.
